The big question was never whether or not consumer electronics giants Google, Apple & Samsung would enter the connected-car space. Like a lot of things in the business, it's generally been regarded as an inevitability. The real question is how much disruption it will cause, especially for the OEMs.
Brendan McNally tries to find out.
When Google announced formation of its “Open Automotive Alliance” earlier this year, there was no great tremor accompanying the news. After all, Google wasn't the first consumer electronics giant to seek entry into the connected car space. Microsoft had started the trend a few years back with an automotive version of their Windows Embedded system, which has yet to go anywhere. Apple's effort, initially called “IOS in the Car,” now renamed “CarPlay,” which a large number of OEMs have signed on to, is as a push button alternative operating system on their telematics rigs. A recent study estimates that by 2020, 93 million automobiles will have CarPlay. Whatever that might mean in revenue, it's still a long way from happening. One might therefore assume the reason Google's Open Automotive Alliance didn't garner that much media buzz was because it really wasn't that big a deal. This would be wrong.
Google's entry into the connected-car space is important, as is Apple's. Samsung is also entering the arena, but it's still way too early to guess how they'll do. The reason so little was made of this development is that people in the business have generally regarded it as natural evolution. The real question was never whether it would happen, but who would get wiped out in the process.
How you look upon all this probably has got a lot to do with where you are in the value chain. We reached out to a number of companies for this article. The three that got back were not what would be called Tier One telematics companies. Instead, they're the ones who make the systems. None felt worried about the New Order, because all believed that what they make is so much better than anything Google or Apple can ever come up with, the tech giants would naturally want them aboard. All agreed it would probably be a good thing because it would hasten a much-needed uniformity of standards, while improving products due to increased competition. At the same time, it would also drive down costs, making the connected-car more affordable. Where they disagreed was what all this will mean for the OEMs. Two believed that OEMs would likely use this as an opportunity to bolster their brands by providing differentiated driver experiences. However, the third questioned whether car manufacturers could count on consumers, especially the younger ones, identifying with car brands, when so much of their user experience comes through a separate brand with its own 's characteristics. With young drivers' brand loyalty shifting away from cars to lifestyle brands like Apple and Google, the OEMs might find themselves outside the ongoing telematics revenue stream and end up going out of business.
Based in Ottawa, Canada, QNX Software Systems provides real-time operating systems for the embedded systems market. Global general director Andrew Poliak dismisses any idea that entering the connected-car space will give Apple or Google a carte blanche to lord it over the smaller players already populating the ecosystem. “As they sit today,” he says, “the Google and Apple solutions don't live in a vacuum that allows them to operate standalone and independent in vehicle platforms.”
Poliak won't say whether his company is part of the Open Automotive Alliance, but he also doesn't mind pointing out that before Google had established it, Google and Audi had launched a telematics initiative and when it got announced, the press release mentioned that it used a QNX operating system as a platform. “You can assume we're tightly integrated with all projected mode implementations,” he says, using the term Google coined for its system.
According to Poliak, the two biggest software 'bomb components' in a vehicle are navigation and speech recognition, which he says is a particularly challenging field. “If there's requirements for a backup camera, you need a system that will pull it in and show it on display. When you do audio mixing, when there's a backup 'beep' telling you you're getting close to the other vehicle, at the same time, you're routing audio. It has to mix those audio signals.”
He gives another example. “When you're using a portable device for hands-free communication that is doing projected modes, you're relying on close coupling between your mouth and the speaker and your ear in the microphone. When you expand that to a microphone in a vehicle and speakers far away, you get echo and you get noise; road noise and wind noise, that requires technology in the vehicle that does wind buffet removal, that requires noise suppression. It isn't decreasing the requirement for electronics embedded, it's expanding the opportunity. So we welcome the tech giants to come and validate the fact that they'll need an advanced, robust, feature-rich operating system.”
NNG is a Hungarian company whose navigation software has been successful all over the world and like QNX, sees itself as well-positioned for the future. They offer a lower-cost solution to bring navigation into vehicles. “We are encouraged that everybody is interested in navigation as a feature and as a user experience,” says Jim Robnett, VP OEM Relations. “When Google and Apple included navigation in their bundling price, you know it's not free because the consumer pays a monthly fee and they pay for their devices. But the assumption is that with navigation, you always have it with you, and quite honestly, that's resetting a lot of the pricing models and the ability for OEMs to price for navigation now.”
Navigation and voice recognition represent a sort of twin keystones for driving down costs for telematics systems, especially to the point of making it affordable for entry-level car models. Having Google or Apple behind the endeavor will likely further bring down the costs by spreading higher levels of standardization and commonality among all the many different makes and models.
The nagging question, though, is whether or not having increased system commonality might ultimately lessen the distinctiveness of individual brands. Jim Robnett admits this is potentially a problem, though not really a serious one. “Our belief is, and when we talk to our OEM partners, they still very much want a differentiated user experience,” he says. “In a way, that dashboard and the cockpit and the center stack is one of the last ways for the OEMs to differentiate their user experience. They have style, they have powertrain, they have efficiency, they have their brand image. Those things are very hard to change. When you talk about efficiency or powertrain, you can spend a lot of money and not move the needle or differentiate yourself very much. But when you get into the cockpit, you can create whatever user experience you want and I think Google and Apple will be a part of that and some consumers will choose that user experience, but the OEMs can create a user experience that really resonates with their customers and their brands and that's why nobody is waving the red flag here.”
In the end, he believes that the dashboard will remain the OEMs' domain. If anything, the CR giants' presence might even help them maintain better control of the telematics suite. “They're going to take it back,” he says. “We use the term 'cracking open the black box.' An OEM used to source a head unit or a center stack to one big supplier, and that suppliers would choose their partners, whether it's silicone, operating system, middleware or applications like navigation. Now the OEMs are cracking that open and in some cases direct-sourcing or direct-selecting the partners that they want to work with.”
Markedly less optimistic is Holger Weiss, CEO of Aupeo, a Berlin-based music provider that acts as a personal DJ through use of a special algorithm that picks songs based on drivers' perceived tastes and preferences. For most of Aupeo's existence, it's been a direct competitor to companies like Pandora and Spotify. But now Aupeo is broadening its capabilities to include navigation services, which consequently will change its relationship to systems integrators like Google or Apple. He believes Pandora and Spotify will likely benefit, since aligning with the giants will give them easy access to new customers. Even though it won't be quite as easy for Aupeo, since they've now evolved into navigation, they still see themselves in an advantageous position. “We will definitely be on OAA and we also will implement CarPlay,” says Weiss. “Why shouldn't we? As long as I have a consumer service, I cannot avoid that. I think for entry-level and mid-level cars, that's the way to go.”
The big question, he says, is what will happen to the OEMs when somebody like Google enters the connected-car space and becomes the software provider? If this happens, then its possible that the OEMs will find themselves cut out from the part of the value chain where the most value will get generated; software and services. If it is not controlled by the OEM, and then the OEM is doomed.
“In the end,” Weiss warns, “the OEM will build beautiful pieces of metal on four wheels, but not participate in the value generation that everyone else is earning.”
This article was originally published by Telematics Update here: http://analysis.telematicsupdate.com/ This topic will be discussed further at Telematics Munich on November 10-11, Europe's largest conference & exhibition dedicated to the future of auto mobility. http://www.telematicsupdate.com/munich/
